Why Making Retirement (Or Other Financial) Decisions Based On Happiness Studies May Not Be A Good Idea

Why Making Retirement (Or Other Financial) Decisions Based On Happiness Studies May Not Be A Good Idea

“Happiness” is highly valued in our society, and the “pursuit of Happiness” as an ideal is even embedded within the U.S. Declaration of Independence. However, “happiness” can mean different things in different contexts. In a very broad sense, the term may align with something along the lines of Aristotle’s “eudaimonia” that was meant to refer to the ultimate aim of humans to live a good life. However, in recent years, a narrower conception of “happiness” has emerged – particularly within psychology and economics research. Based on a desire to evaluate how factors such as income are related to “happiness”, researchers have come up with survey questions such as “How happy are you on a scale of 1 to 3” that are then used to test all sorts of hypotheses regarding the relationships between life circumstances and happiness.

There’s nothing intrinsically wrong with such research; however, studies based on this narrow conception of happiness tend to make for good headlines and often get widely cited in the media (e.g., “People who drink coffee are happier!”). As a result, such studies can gain traction to the point that they could actually influence life decisions, and that can be problematic.

First, there’s the issue that personality is actually one of the strongest predictors of “happiness” (as reported in such studies). For instance, all else being equal, extraverted individuals simply tend to report they are “happier” than introverted individuals when presented with such survey questions. Moreover, extraversion is associated with all sorts of life decisions (e.g., living in cities), which means that we can’t make much of research findings that don’t consider how personality factors influence results. For instance, if survey respondents who live in cities report that they are happier than those who don’t, are they “happier” because city life makes people happier? Or is it simply the case that more extraverted people live in cities and are also more likely to report they are happy no matter what their life circumstances? And beyond that, even if it’s true that city living makes some people happier, it does not necessarily follow that an introvert who likes to live in the mountains would be happier if they were forced to relocate to a city.

More fundamentally, however, is the issue that this narrow conception of happiness (i.e., happiness that can be rated through shallow inquiries such as, “How happy are you on a scale from 1 to 3?”) is not an effective way to choose life goals that will actually bring a person long-lasting satisfaction. Researchers have criticized the notion that people should chase these narrower forms of happiness, rather than orienting one’s life toward the pursuit of meaning and purpose – which often comes from accomplishments that take work and are not easy.

A common example of how media has hyped happiness studies within a personal finance context comes from Michael Finke’s oft-cited finding that parents who live near their children in retirement are less happy than those who don’t. Notably, the relationships between living near children and happiness in retirement are often tiny, and even Finke and his coauthors found that they were non-existent when controlling for other factors. Such studies also generally can’t control for other factors such as personality or the possibility that factors such as declining health (and therefore children moving to parents rather than vice-versa) are the actual factors driving the observed (tiny/non-existent) relationships.

No one lies on their death bed wishing they’d averaged 2.5 rather than 2.4 on their lifetime happiness score when measured on a scale from 1 to 3. However, many people do lie on their death beds wishing they’d spent more time with family, built better relationships, or otherwise engaged in pursuits that brought a sense of purpose and meaning. That’s even true – and perhaps particularly so – when pursuits that brought purpose and meaning were challenging and required sacrifice. Ultimately, unless we’re truly indifferent between two alternatives or realize we’ve made some life decisions without giving much conscious thought, happiness studies are simply not a great way to make life decisions. Instead, we are generally better served thinking about what we know about ourselves, and relying on that to guide our important decisions in life.

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